ITAT Hyderabad: Reassessment Disallowance of Depreciation on Intangible Assets Impermissible

The ITAT Hyderabad ruled in favor of the Assessee, holding that the reassessment based on disallowance of depreciation on intangible assets was impermissible as it amounted to a change of opinion. The ITAT also upheld the CIT(A)'s decision to allow depreciation on intangible assets, citing previous Tribunal decisions in favor of the Assessee. The Assessee's appeal was allowed, and the Revenue's appeal was dismissed.

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Issues:
Reopening of assessment u/s 147 based on disallowance of depreciation on intangible assets acquired from another company.

Analysis:
1. Reopening of Assessment: The case involved cross-appeals by the Assessee and Revenue for the AY 2008-09 against the order of the Commissioner of Income Tax (Appeals)-4, Hyderabad, on the reopened assessment u/s 147. The Assessee, engaged in manufacturing pharmaceutical ingredients, filed a return of income admitting an income under normal provisions and book profit u/s. 115JB of the Act. The Transfer Pricing Officer (TPO) made adjustments, and the AO issued a notice for reassessment disallowing depreciation on intangible assets acquired from another company. The Assessee contended that the reassessment was impermissible as it amounted to a change of opinion, not a valid reason to believe under the statute. The ITAT held that the reopening of assessment was based on a change of opinion, not tangible material, and allowed the Assessee's appeal.

2. Disallowance of Depreciation: The AO disallowed depreciation claimed by the Assessee on intangible assets based on a previous assessment order. The CIT(A) allowed the depreciation, citing the Tribunal's decisions in earlier years. The ITAT upheld the CIT(A)'s decision, stating that the issue was covered in favor of the Assessee by previous Tribunal decisions. The ITAT rejected the Revenue's grounds and allowed the Assessee's appeal, directing the AO to delete the disallowance on intangible assets.

In conclusion, the ITAT Hyderabad ruled in favor of the Assessee, holding that the reassessment based on disallowance of depreciation on intangible assets was impermissible as it amounted to a change of opinion. The ITAT also upheld the CIT(A)'s decision to allow depreciation on intangible assets, citing previous Tribunal decisions in favor of the Assessee. The Assessee's appeal was allowed, and the Revenue's appeal was dismissed.

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